Quarter Results:

Results compared to the prior quarter, as well as the same quarter in the prior year, are as follows (in millions):

                            Q2 2009     Q1 2009    Q2 2008     Net sales                 $15.4       $15.3      $13.3       Operating income (loss)   $4.1        $3.5       $(18.3  )   Net income (loss)         $0.4   *    $2.8       $(18.2  )   EBITDA                    $2.8   *    $5.3       $(14.0  )    -------------------------------------------------------------------------------  

* Excluding the non-cash equity impairment charge discussed below, net income and EBITDA for the second quarter of 2009 would have been $4.0 million and $6.3 million, respectively. These amounts are non-GAAP and meaningful as the impairment charge doesn't impact our cash operations. EBITDA is defined by Merge as earnings before interest expense (net), taxes, depreciation and amortization (which includes the amortization of stock-based compensation).

The second quarter of 2009 includes a $3.6 million non-cash write down of an equity interest in Eklin Medical Systems, Inc. ("Eklin") as a result of the acquisition of Eklin by VCA Antech, Inc. (NASDAQ: WOOF)("VCA"). Merge will receive $1.4 million for its equity interest in Eklin, the majority of which will be collected in the third quarter of 2009. Additionally, Eklin and Merge executed a new value added reseller ("VAR") agreement that Eklin assigned to VCA through the acquisition. This new Eklin VAR agreement generated $2.2 million of additional revenue in the second quarter.

Diluted earnings per share in the second quarter of 2009 were $0.01, compared to a $0.05 in the first quarter of 2009 and a loss of $0.45 in the second quarter of 2008.

For comparison purposes, it should be noted that the second quarter of 2008 included the following charges:

$7.5 million for restructuring activities;

$1.1 million due to a trade name impairment;

$1.7 million related to the disposal of a French subsidiary; and

$3.0 million related to a shareholder lawsuit settlement.

In the second quarter of 2009, the cash balance increased by $0.3 million to $20.0 million at June 30, 2009. The cash activity in the second quarter was impacted by $1.3 million of cash paid to acquire certain assets and related obligations from eko systems, inc. in April.

In addition, net accounts receivable increased by $0.8 million to $14.2 million, while deferred revenue decreased by $1.8 million to $13.0 million at June 30, 2009. As a result of the VAR agreement with Eklin, $0.8 million of revenue deferred under a prior agreement was recognized in the second quarter of 2009.

Year-to-Date Results:

Merge's financial results for the six months ended June 30, 2009, compared to the prior year are as follows (in millions):

                            2009     2008        Net sales                 $30.7    $27.1       Operating income (loss)   $7.7     $(26.7  )   Net income (loss)         $3.3     $(26.0  )   EBITDA                    $8.1     $(19.1  )    -------------------------------------------------------------------------------  

Diluted earnings per share in the six months ended June 30, 2009 were $0.06, compared to a loss of $0.70 in 2008.

Conference Call Information:

Merge will hold a public web cast today at 4:15 p.m. EDT to review these financial results and to provide an update on business operations and strategy. Immediately following, there will be a question and answer session.

Investors will have the opportunity to listen to the conference call via telephone or over the Internet at Merge Healthcare Web Cast. To access the call, dial 1.800.221.2015 or 706.634.2159. The Conference ID Number to reference is 20416411. A replay via the Internet or telephone will be available shortly after the call at http://www.merge.com/investor/conferencecall.asp.

Merge Healthcare Incorporated builds software solutions that automate healthcare data and diagnostic workflow, both to build a better electronic record of the patient experience, and also to enhance product development for health IT, device and pharmaceutical companies. Merge products, ranging from standards-based development toolkits to fully integrated clinical applications, have been used by healthcare providers and researchers worldwide for over 20 years. Additional information can be found at www.merge.com.

Information included in this news release may contain forward-looking statements, concerning, among other things, Merge's outlook, financial projections and business strategies, all of which are subject to risks, uncertainties and assumptions. These forward-looking statements are identified by their use of terms such as "intend," "plan," "may," "should," "will," "anticipate," "believe," "could," "estimate," "expect," "continue," "potential," "opportunity," "project" and similar terms. These statements are based on certain assumptions and analyses that Merge believes are appropriate under the circumstances. Should one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results may differ materially from those expected, estimated or projected. Merge can not guarantee that it will achieve these plans, intentions or expectations. Forward-looking statements speak only as of the date they are made, and Merge undertakes no obligation to publicly update or revise any of them in light of new information, future events or otherwise, except as required by law. Factors that could have a material adverse effect on operations and future prospects of Merge include, but are not limited to: market acceptance and performance of Merge's products and services; the impact of competitive products and pricing; the risks and effects of its recent securities issues; the past restatement of our financial statements; the amount of the costs, fees, expenses and charges related to the acquisition of etrials Worldwide, Inc. ("etrials"); the ability of Merge Healthcare to integrate etrials successfully; whether the transaction will result in the enhancement of value and benefits to customers and to Merge Healthcare's and etrials' stockholders; general economic and business conditions; global economic growth and activity; industry conditions; and changes in laws or regulations. our ability to generate sufficient cash from operations to meet future operating, financing and capital requirements, including repayment obligations with respect to our outstanding indebtedness; risks associated with our prior delays in filings with the SEC or our ability to continue to meet the listing requirements of The NASDAQ Stock Market; the costs, risks and effects of various pending legal proceedings and investigations, including the formal investigation being conducted by the Securities and Exchange Commission and the pending settlements of certain class action and derivative lawsuits; and other risk factors detailed in our filings with the Securities and Exchange Commission. These uncertainties and risks may cause our actual future results to be materially different than those expressed in our forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. We undertake no obligation to update such forward-looking statements or any of such risks, uncertainties and other factors, except as required by law.

                                                                          MERGE HEALTHCARE INCORPORATED AND SUBSIDIARIES                          CONDENSED CONSOLIDATED BALANCE SHEETS                                   (in thousands)                                                          (unaudited)                                                                                                                                                                                  June 30,    December 31,                                                2009        2008                                                                                   Current assets:                                                         Cash (including restricted cash)             $  19,967   $  17,848      Accounts receivable, net                        14,191      12,779      Inventory                                       169         550         Prepaid expenses                                1,349       1,509       Deferred income taxes                           217         217         Other current assets                            1,166       721         Total current assets                            37,059      33,624                                                                              Property and equipment, net                     1,599       1,974       Purchased and developed software, net           4,770       5,653       Customer relationships, net                     2,057       2,291       Goodwill                                        1,770       -           Deferred tax assets                             4,585       4,585       Investments                                     1,971       5,690       Other                                           50          920         Total assets                                 $  53,861   $  54,737                                                                              Current liabilities:                                                    Accounts payable                             $  3,351    $  4,036       Accrued wages                                   1,663       1,590       Restructuring accrual                           549         1,173       Deferred revenue                                12,591      16,150      Note payable                                    14,489      -           Other accrued liabilities                       2,333       2,421       Total current liabilities                       34,976      25,370                                                                              Note payable                                    -           14,230      Deferred income taxes                           39          39          Deferred revenue                                375         644         Income taxes payable                            5,449       5,418       Other                                           122         195         Total liabilities                               40,961      45,896                                                                              Total shareholders' equity                      12,900      8,841       Total liabilities and shareholders' equity   $  53,861   $  54,737       -------------------------------------------------------------------------------  

                                                                                                                                        MERGE HEALTHCARE INCORPORATED AND SUBSIDIARIES                                                                                        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                                                                       (in thousands, except per share data)                                                                                                 (unaudited)                                                                                                                                                                                                                                                                                                                           Three Months Ended                    Six Months Ended                                                                                June 30,                              June 30,                                                                                        2009               2008               2009               2008                                                                                                                                                     Net sales                                                                                                                             Software and other                                        $  9,020           $  6,280           $  17,704          $  12,335          Services and maintenance                                     6,333              7,035              12,958             14,723          Total net sales                                              15,353             13,315             30,662             27,058          Cost of sales                                                                                                                         Software and other                                           880                1,329              2,110              2,528           Services and maintenance                                     2,373              3,168              4,523              6,943           Amortization                                                 623                716                1,273              1,432           Total cost of sales                                          3,876              5,213              7,906              10,903          Gross margin                                                 11,477             8,102              22,756             16,155          Operating costs and expenses:                                                                                                         Sales and marketing                                          1,826              2,311              3,498              5,673           Product research and development                             2,543              3,485              4,814              8,220           General and administrative                                   2,104              8,452              5,356              14,610          Acquisition-related expenses                                 339                -                  339                -               Trade name impairment, restructuring and other expenses      -                  10,705             -                  12,067          Depreciation, amortization and impairment                    546                1,458              1,094              2,300           Total operating costs and expenses                           7,358              26,411             15,101             42,870          Operating income (loss)                                      4,119              (18,309     )      7,655              (26,715     )   Other income (expense)                                       (3,652      )      (272        )      (4,324      )      302             Income (loss) before income taxes                            467                (18,581     )      3,331              (26,413     )   Income tax expense (benefit)                                 21                 (384        )      43                 (384        )   Net income (loss)                                         $  446             $  (18,197     )   $  3,288           $  (26,029     )                                                                                                                                         Net income (loss) per share - basic                       $  0.01            $  (0.45       )   $  0.06            $  (0.70       )   Weighted average number of common                                                                                                     shares outstanding - basic                                   56,278,744         40,251,186         56,291,586         37,088,684                                                                                                                                            Net income (loss) per share - diluted                     $  0.01            $  (0.45       )   $  0.06            $  (0.70       )   Weighted average number of common                                                                                                     shares outstanding - diluted                                 57,905,444         40,251,186         57,513,818         37,088,684       -------------------------------------------------------------------------------  

                                                                                                                          MERGE HEALTHCARE INCORPORATED AND SUBSIDIARIES                                                                          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                         (in thousands)                                                                                                          (unaudited)                                                                                                                                                                                                                                                                                                                              Six Months Ended                                                                                                        June 30,                                                                                                                2009           2008            Cash flows from operating activities:                                                                                   Net income (loss)                                                                        $  3,288       $  (26,029  )   Adjustments to reconcile net income (loss) to                                                                           net cash provided by (used in) operating activities:                                                                    Depreciation, amortization and impairment                                                   2,367          3,732        Share-based compensation                                                                    885            3,534        Loss on disposal of subsidiary                                                              -              1,713        Amortization of note payable issuance costs & discount                                      552            74           Unrealized loss on investment                                                               3,553          -            Trade name impairment                                                                       -              1,060        Provision for doubtful accounts receivable and sales returns, net of recoveries             264            22           Deferred income taxes                                                                       -              (384     )   Net change in assets and liabilities (net of effects of acquisitions and dispositions)      (7,501  )      5,912        Net cash provided by (used in) operating activities                                         3,408          (10,366  )   Cash flows from investing activities:                                                                                   Cash paid for acquisitions                                                                  (1,250  )      -            Purchases of property, equipment and leasehold improvements                                 (91     )      (482     )   Change in restricted cash                                                                   258            -            Net cash used in investing activities                                                       (1,083  )      (482     )   Cash flows from financing activities:                                                                                   Proceeds from issuance of term note, net of non-cash discount of $510                       -              14,490       Proceeds from issuance of Common Stock                                                      -              5,479        Note and stock issuance costs paid                                                          -              (2,386   )   Proceeds from exercise of stock options and employee stock purchase plan                    52             30           Net cash provided by financing activities                                                   52             17,613       Effect of exchange rate changes on cash                                                     -              (33      )   Net increase in cash                                                                        2,377          6,732        Cash and cash equivalents, beginning of period (net of restricted cash) (1)                 17,227         13,637       Cash and cash equivalents, end of period (net of restricted cash) (2)                    $  19,604      $  20,369                                                                                                                               (1) Restricted cash of $621 and $363 at December 31, 2008 and 2007, respectively.                                       (2) Restricted cash of $363 and $363 at June 30, 2009 and 2008, respectively.                                            -------------------------------------------------------------------------------  

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